There are many events dedicated to SME worldwide, hot issues are brought up which are closely related to Economic Development, Innovations, Technology Transfer, Needs for effective Training and Support for SMEs and impact of all these for sustainability of economies in countries. In-depth analysis are made in many reports including several ones presented in this conference. There are many directions for improvement actions identified.
Let’s take another country which is well developed The inefficiencies are hidden and hard to identify unless basic measurements are available. These are estimations calculated on basic data obtained in interviews.
Challenges they have: Performance management is missing: most cases there is no budget, systematic control of expenditures in key categories (i,e. material costs), quality, productivity, added value per person, product, overall, Important decisions are not prepared based on simulation of consequences (i.e., it is experiment on themselves and challenge for their business sustainability “to be or not to be”), there are mostly no optional solution and comparisons of outcomes, It becomes more and more dangerous to run businesses this way in our more globalised, competitive and complex world.
Who and what are these people <SME leaders, entrepreneurs, industrialists> shaping out the very important part of national economics in Arab and many other countries? The picture of a Entrepreneurs after successful start-up : Former technical specialists with business ideas, good entrepreneurs, however without special business management education Managers with practical experience hired by owners for running the businesses (main criteria is Trust, Personal relations, Reliability, Technical background in production, etc with the other qualifications like Performance Management skills the least ones Young generation in families with general business management education Most of the people are lack of knowledge of performance measurement and management methodology as well as available tools. Even if they have such backgrounds there is another challenge: establishing relevant easy-going practices routinely is very difficult and time consuming. Personnel does not take additional duties easy (results of our observations in many countries). Result: Performance management is missing: most cases there is no budget, systematic control of expenditures in key categories (i.e.. material costs), quality, productivity, added value per person, product, overall, Important decisions are not prepared based on simulation of consequences (i.e., it is experiment on themselves and challenge for their business sustainability “to be or not to be”), there are mostly no optional solution and comparisons of outcomes, Business is running, in many cases it looks successful however no one knows realities in detail. However such way of evolutionary self-training and experimentation on themselves in such complex system as industrial production is becomes more and more risky in our more globalised and competitive and complex world.
An entrepreneur is like a captain sailing his enterprise ship to some destination.
Nowadays it is very much important not only to reach the destination but make it happen in the shortest time with minimum costs and in easy controllable and reliable way while being in competitive environment.
Note that if the most technologically advanced and innovative ship would not help captain who is lack of navigation skills, effective planning and controlling of the route. Even more it increases the impact of loses and inefficiencies due to increased costs of modern complex technologies.
At the same time one can note the gap between analysis and identification of practical steps to introduce improvements and change some negative trends. The aims of our work within UNIDO upgrade programmes were to identify and develop practical solutions and procedures which can improve industrialist knowledge, capacity to run their businesses effectively, minimize inefficiencies and make their businesses sustainable. Who are these people <SME leaders, entrepreneurs which we speak about? >>>> NEXT SLIDE
At the same time one can note the gap between analysis and identification of practical steps to introduce improvements and change some negative trends. The aims of our work within UNIDO upgrade programmes were to identify and develop concrete standardized procedures and knowledge which can improve industrialist knowledge, capacity to run their businesses effectively, minimize inefficiencies and make their businesses sustainable. Who are these people <SME leaders, entrepreneurs which we speak about? >>>> NEXT SLIDE
What are the main components of the solutions developed for the last 6 years within the UNIDO upgrade programmes in various countries which we took part in? Target recipients customers: entrepreneurs, managers of SMEs, having passed incubator phase, having business running for at least several months, willing to introduce BUSINESS MEASUREMENT and TOOLS for analysis of major business indicators, obtain relevant knowledge and establish best practices in their businesses, start preparing decision evaluation and comparison systematically, develop best continuous improvement practices and lean manufacturing. It is learning, know-how and practices development.
100 national consultants are required for a Programme fot 1000 SMEs. The consultants shall be selected from 120 trained candidates.
S h ow B enchmark Report for Lebanon He reports shows only RELATIVE CHANGE FIGURES
Business benchmarking radar graph allows seeing changes easy and quickly.
Business benchmarking graphs allow seeing trends and note changes quickly.
Results: introduction if UNIDO IT tools and best practices makes business stronger, more effective, competitive, sustainable, ensures better ground for introducing of innovations, transfer of new technologies and export potential. All these facilitates better environment for new investments, introduction of traceability, simplified path to ISO 9000 certification, further introduction of real time performance monitoring of economic development in key industrial sectors. Experiences are very positive and promising. The Programmes allow not only introduce UNIDO IT tools into entrepreneurs minds and activities, but changing the culture of running the businesses, obtaining actual measurements of business results in the format of UNIDO benchmarking report, have firm approach in improving and developing businesses in the most effective ways by using internally available resources.
Actual results of KPI Measurement for several companies reveal important industrial statistics for sectors presenting trends and possibility of analysis
Funding allows getting real tangible documented increase on economic growth and stability
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Facilitating knowledge based sustainability of economic growth by applying UNIDO methodology, IT tools and developing of best continuous improvement practices in Training & Upgrading Programmes for Entrepreneurs Measuring and Improving Business Results
Presentation at World Association for Small and Medium Enterprises (WASME) 2005 Conference in Bucharest, Romania, 16-18 May 2005 by Serge Golovanov, PhD, Dipl.Eng., UNIDO International Consultant Director, Enterprise Performance Improvement Centre , GOLEM IMS GMBH , Vienna, Austria in partnership with United Nations Industrial Development Organization (UNIDO) , Vienna, Austria www.win2biz.com www.golem.at
<ul><li>Focus on Small and Medium Enterprise performance and innovation management capacity: </li></ul><ul><ul><li>Do entrepreneurs manage businesses with high efficiency and min losses? NO! </li></ul></ul><ul><ul><li>Do they have & use IT tools to measure business results and simulate decisions? NO! </li></ul></ul><ul><ul><li>Can innovation, technology transfer be managed effectively in such cases? NO! </li></ul></ul>
Definition of Small and Medium-sized Enterprises 50 - 250 Middle 10 - 50 Small < 10 Micro Number of employees Category
<ul><li>Estimations of lost gross profit (GP) due to various inefficiencies, per annum </li></ul><ul><li>Enterprise Group 1 (GP € 400,000): 54,900 € </li></ul><ul><li>Enterprise Group 2 (GP € 3,000,000): 215,500 € </li></ul>The price of ignorance ( UK case studies, CoVE and MII, food industry):
Average enterprise improvement results benchmarked after the Programme implementations <ul><li>Overall Productivity Increase (or value Added/person) + 9% </li></ul><ul><li>Improved Efficiency + 18% </li></ul><ul><li>Improved Gross Profit + 25% </li></ul><ul><li>Reduction in Labour cost - 15% </li></ul><ul><li>Overall Effective Efficiency increase + 5% </li></ul><ul><li>Acceleration of business development - 6 years </li></ul>
<ul><li>Challenges facing entrepreneurs: </li></ul><ul><li>Businesses are run with relatively high losses and inefficiencies without knowing actual figures! </li></ul><ul><li>Major decisions are not prepared and evaluated in necessary detail, compared by consequences, optimized and monitored in implementation </li></ul><ul><li>The potential is underutilized, developments are risky, results may be unpredictable and unexpected ! </li></ul>
<ul><li>Entrepreneurs & management of SMEs need assistance in bringing up : </li></ul><ul><li>Culture in business planning, monitoring and measurement </li></ul><ul><li>Understanding and using Total Quality Management principles </li></ul><ul><li>Structured practical management in Continuous Improvement </li></ul><ul><li>Resources and knowledge to introduce and effectively use IT tools for business monitoring, measurement and decision preparation </li></ul><ul><li>Obtaining know-how and training in performance management (lack of time and funds for training, its well targeting, etc) </li></ul><ul><li>Assistance by Regional Governments, Associations, Chambers, etc. in building capacity to improve the situation </li></ul>
Businiess Navigation: Measuring & Monitoring & Planning of Business Performance Results
Sailing to target destination Initial position Target (Promised Land) Ideal path
Sailing without navigation New technologies do not help reaching the target but can make failure impact more costly and severe! (e.g. new engine, design or construction of the ship do not change the outcome )
SME mortality rate after successful start-up is high due to premature death of SMEs caused by uncontrollable losses and non- efficiencies unknown to management Result: Most of SMEs are running life time experiment “ W i n or D i e” ! Actual data by San Paulo Department of Statistics, Brazil: 5 billion dollars lost and 530 thousands jobs in the medium and low range of manpower are lost within one year in San Paulo State only. 1,000,000 businesses closed between 1990-2002 just in the State of San Paulo worth of 62 billion dollars in invoicing and consequent losses in taxes. (Source: Newspaper “O Estado de San Paulo”, Economy and Business Section, 4th December 2003) Similar situation exists in other developing countries lacking of official statistics. ?
Common issue: What are the practical solutions for enterprise s ?
Continuously improving business based on its measurement
Basic principles of continuous improvement in business <ul><li>Measuring business results ( UNIDO Software ) </li></ul><ul><li>Identifying problematic areas having measurements data </li></ul><ul><li>Formulating optional solutions which can potentially solve problems and bring improvements (new machine, production profile, production team change & control, etc) </li></ul><ul><li>Evaluating impact of uncertainties and risks by simulating the major outcomes ( scenarios ) </li></ul><ul><li>Selecting the best (e.g. most profitable & sustainavle ) option </li></ul><ul><li>Implementing the decision in practice </li></ul><ul><li>Returning to Step 1 </li></ul>
Components of UNIDO’s Enterprise Business Performance Management Solution Software Suite Client Support & Consulting on-site Training Course In country – regional industrial center Vienna or any European location Certification Enterprise Professionals Benchmarking Software Installation Data collection & entry, Biz target setup Reports, Export-import Measuring & Improving Business: Developing best practices Pharos – Business Navigator Produce Plus Financial Improvement Toolkit
The Programme Content & Budget <ul><li>Awareness seminars, selecting of enterprises </li></ul><ul><li>Training courses for SME management (5 days, < 24 persons per group) </li></ul>
The Programme Budget Components 3. UNIDO Business Performance Measurement & Management Software tools (at least 2 licenses per enterprise for general and production managers )
Phase 2 option: On-site consulting & support <ul><li>Training and certification of client’s support team </li></ul><ul><li>Transfer of know-how, methodology to Enterprise Management, setting best continuous improvement practices (up to 12 months, 1 consultant support up to 10 enterprises, installing software, data collection, business targets, decision support, results’ measurement, etc). </li></ul><ul><li>Final results evaluation and reporting, conference </li></ul>
UNIDO Performance measurement tools: Business Benchmarking Report
Key Business Indicators (KBI) in bench - marking module
UNIDO Performance Measurement tools: Pharos Business Navigator (main menu)
<ul><li>Produce Plus </li></ul>UNIDO Performance Measurement tools: Produce Plus (main menu)
Some practical outcomes <ul><li>Pre & Post Programme enterprise benchmarking , </li></ul><ul><li>diagnostics, performance measuring, production efficiency analysis provided for each participating enterprise (customers, suppliers, non-conformances, planning, production resources' utilization, etc.) </li></ul><ul><li>UNIDO Certificates of “ Enterprise Business Performance Excellence “ for enterprises and “ Business Performance Management Excellence ” for entrepreneurs and managers based on benchmarked improvements. </li></ul><ul><li>Training of SME managers in presentation of the enterprise performance results to investors and credit institutions </li></ul>
Expected Results <ul><li>Improvement of Key Performance Indicators (KPI) ~ 10% in average, e.g. Gross Profits, Productivity (Added Value per Employee), etc. </li></ul><ul><li>Increase in taxation results </li></ul><ul><li>Benchmarking reports for each enterprise, </li></ul><ul><li>Documented Upgrading Programme results </li></ul><ul><li>Important benchmarking data for performance of industrial sectors </li></ul><ul><li>Investment environment improving due to increased transparency of businesses </li></ul><ul><li>Certificates for Enterprise and its Management </li></ul><ul><li>Improved culture in management of business performance and innovations, sustainability and competitiveness </li></ul>
<ul><li>Average annual sales, USD - $632 000 </li></ul><ul><li>Net Profit average % (shoe production factory) - 5% </li></ul><ul><li>Increase of net profits, post programme % - 10% </li></ul>Enterprise Model of Training Programme Efficiency (net profit only)
<ul><li>Number of enterprises in the sector of industry served - 1 000 </li></ul><ul><li>Net profit increase per sector, post-programme - $12 , 008 , 000 </li></ul><ul><li>Taxation (annual gross profit, example %) - 35% </li></ul><ul><li>Increase in taxation income for Government, annual - $ 4 , 202 , 800 </li></ul>Training Programme Results National Industry Model (limited by consideration net profit factor only)
<ul><li>Implementations </li></ul><ul><li>UNIDO integrated programme: the Republic of Komi, Russia Sustainable Industrial Development and Competitiveness, Oct. 1999 </li></ul><ul><li>Strengthening of Small and Medium automotive component suppliers to deliver export quality products in India, Nov. 1999, India, New Delhi, Pune, Bangalore, Mumbai, Baroda, Nashik, Ahmednagar. </li></ul><ul><li>Application of Quality Principles To The Food Processing Sector of 7 Sub-Sahara African Countries, July 2000 Kenya, Uganda, Tanzania, Zambia, Ethiopia, and Zimbabwe. </li></ul><ul><li>4. Application of Quality Principles To The Leather Production Sector in Egypt, April 2001, Cairo, Egypt </li></ul><ul><li>5. Integrated Programme for Columbia, 4 industrial sectors, Ibage, Pereira (Eje Cafetero), Barrancabermeja. </li></ul>
<ul><li>6. The workshop "Strategic and production management of industrial enterprise: application of UNIDO benchmarking and business excellence tools Pharos + Produce-Plus", UNIDO ITPO/ARCEIT Manama, Bahrain. </li></ul><ul><li>7. The workshops "Application of UNIDO benchmarking and business excellence tools for enterprise upgrading, strategic and production management of industrial enterprises, IMC/UNIDO workshops, Cairo – Alexandria - Borg El Arab, Egypt, February - April 2004. </li></ul><ul><li>Introducing UNIDO measurement tools for continuous improvements in quality, efficiency, productivity and competitiveness in manufacturing, Association of Lebanese Industrialists (ALI), Euro-Lebanese Center for Industrial Modernization (ELCIM), Lebanon, June – October 2004. </li></ul><ul><li>Improving Business Performance by Introducing Continuous Improvement Practices Based on UNIDO Business Performance Management Software, August – December 2004, UNIDO Programme for Palestine. </li></ul>
<ul><li>C o n c l u s i o n s : </li></ul><ul><li>The majority of entrepreneurs, industrialists does not have sufficient knowledge, performance management tools and practices to monitor and measure their businesses, optimize decisions, eliminate inefficiencies systematically and maximize use of available resources. </li></ul><ul><li>The Training and Upgrade Programmes for SMEs introduce best continuous improvement practices and UNIDO IT tools facilitating productivity, competitiveness, qua lit y, sustainable growth in areas where real and tangible improvements can be made . </li></ul><ul><li>SMEs become much more transparent and better prepared for national and international investors , improving export potential. </li></ul><ul><li>The Training Programmes facilitate entrepreneurs capacity building in introduction and managing of innovations, new technologies. </li></ul>
<ul><li>C o n c l u s i o n s (cont) </li></ul><ul><li>The Training Programmes facilitate human resource developments, managerial capacity and potential, path to ISO 9000 standardization, meeting WTO requirements, decreasing SME mortality in the regions . </li></ul><ul><li>The Training Programmes deliver unique content and provide comprehensive package of services at acceptable cost level resulting in important Knowledge Capital Gain. </li></ul><ul><li>Governmental and international support of the Training Programs is an effective way to boost economic performance and sustainability of industrials sectors in regions. </li></ul><ul><li>The programme results are measured and documented providing vital economic and industrial statistics to organizers and donors . </li></ul>
Input: < N, 000 EURO per enterprise <ul><li>The practical instruments exist and proved: Training and Upgrade Programmes for SMEs </li></ul><ul><li>The costs of fundamental improvements are reasonable and realistic compared to any other existing options. </li></ul><ul><li>The results are measurable and documented. </li></ul>Output: Measurable increase of major indicators including net profits, productivity, etc. The total enterprise service package price depends on the Programme duration, national consultants salaries in country, number of participating enterprises and some other factors Training Programme with or without on-site support <12 months
International Partnerships <ul><li>Representative functions: UNIDO Focal Point – National Enterprise Performance Improvement C enter </li></ul><ul><li>Innovative directions of working with SMEs </li></ul><ul><li>A ddressing ke y national priorities defined by Governments </li></ul><ul><li>N ew projects and funding options by EU, UN, international and national donors </li></ul><ul><li>Preparing SMEs for introducing innovations and new technologies in effective and controllable way </li></ul><ul><li>Training of national consultants and entrepreneurs in country or/and in Austria </li></ul><ul><li>Sharing national experiences and benchmarking results </li></ul><ul><li>Distributing UNIDO methodology, software and best practices </li></ul>
The Message <ul><li>We welcome associations with national counterparts supporting growing SMEs industries in countries by </li></ul><ul><ul><li>Deploying </li></ul></ul><ul><ul><li>Training ( in country and/or in Europe ) </li></ul></ul><ul><ul><li>Implementing </li></ul></ul><ul><ul><li>Improving and Benchmarking </li></ul></ul><ul><li>with UNIDO Business Performance Management Solutions for entrepreneurs bringing up productivity, competitiveness, quality and ma k ing industrial development more effective sustainable and prosperous! </li></ul>
Development , Training and Support Center for UNIDO Business Performance Management products Member of INSME Association Contacts : Enterprise Performance Improvement Centre GOLEM IMS GMBH, Vienna, Austria www.win2biz.com e-mail: email@example.com
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